Russia's evolving energy policy for its eastern regions, and implications for oil and gas cooperation between Russia and China

Abstract

Cooperation between Russia and China began in the early 1950s when the Soviet Union provided China with the technology and skills required to develop a modern oil industry. This assistance was withdrawn in 1958 as Sino-Russian relations deteriorated. During the following decades, each country developed its oil and gas industries independently of each other. Russia became a major exporter of natural gas to Europe, whilst China became a significant exporter of oil, mainly to East Asia. This situation changed in the early 1990s for two reasons. First, the collapse of the Soviet Union triggered a transformation of policies and incentives within the newly independent states, including within the Russian Federation. Second, China itself was becoming a net importer of oil and was starting to understand the potential benefits of increasing the use of natural gas for its energy supply. By the mid-1990s, government agencies and energy companies in both Russia and China had identified that an undeniable logic existed for the construction of major oil and gas export pipelines from Russia to China.1 Such projects appeared to address a wide range of economic, commercial, energy and diplomatic priorities for both nations, not least because other forms of economic interaction were progressing only very slowly at that time.2 By the late 1990s, considerable optimism existed that decisions were imminent on a number of important projects, especially in relation to the construction of pipelines to bring oil and natural gas from Russia to China.